The Bank of England’s Monetary Policy Committee has raised rates by 0.25 percentage points to 1% – the highest they’ve been in 13 years.

The Bank said it now expects inflation to rise to 10% this year.

It had already raised its Bank Rate from 0.1% to 0.25% in December 2021, to 0.5% in February 2022, and then again to 0.75% in March. This month it has hiked it again to 1%.

The Bank warned it may need to increase interest rates further in the coming months.

What does it mean for your mortgage?

Mortgage borrowers on a variable rate could see their pay rate – and therefore monthly repayments – rise in the coming month.

According to Hargreaves Lansdown, if you’re one of the 1.1 million people on a standard variable rate mortgage, or one of the 850,000 with a tracker, your costs will rise.

The investment platform said that someone with a £300,000, 25-year, repayment mortgage on the average SVR could see their monthly payments go up by over £40 a month.

Sarah Coles, senior personal finance analyst at the business, said: “Three quarters of mortgage holders are protected by a fixed rate mortgage, but while they’ll be reaping the benefits during the fixed period, it means they’ll feel the impact in one fell swoop when their mortgage expires. The Bank’s efforts to bring in rates gradually and smoothly will be no use to anyone who remortgages and sees their rates jump overnight. 1.5 million of these fixed rates are set to expire this year.”

Brian Murphy, head of lending at Mortgage Advice Bureau, added: “The Bank of England is on a hiking path, something many homeowners have not had to face for 13 years. Coupled with soaring cost of living, raised energy bills, and low consumer confidence, for many new buyers the prospect of housing affordability is sprinting away from them.

“There are expectations across the market that interest rates will surge even higher this year and homeowners need to be poised for what this means for their finances and their mortgage payments, particularly those on a tracker or variable rate. Mortgages are one of the biggest monthly expenses for homeowners, so it’s worth using a mortgage repayment calculator to see if switching could save money in the long run. Speaking to a whole of market mortgage broker can also help advise you on what the best options are for your circumstances.”